2 min read September 2022 — Keith Wallace, leasing and business development for Merritt Properties, spoke with Invest: about what has kept his organization busy and what the recent development of Merritt RDU Business Park will add to the region. Additionally, Wallace discussed how a potential slowdown will affect his organization’s growth strategy moving forward.
What have been the primary highlights for your operations over the last 12 months?
We are about to reach 600,000 square feet of light industrial space with three business parks in the Triangle Region. I’m proud to say that we have already signed 45 tenants in the Triangle area, and that’s after putting a shovel in the ground in Durham in April 2020, an interesting time to begin a development project for sure! However, we were able to complete construction and fully lease our first project, TW Crossing, in just two years. It says a lot about our success and is a testament to our team, especially the achievements we have been able to reach together. Overall, I’m most excited about the team of Merritt people, tenants, business communities and contractor partners that I get to work with each day.
What will Merritt RDU Business Park add to the region?
This project is going to be our largest investment in the Triangle, and it’s going to offer over 700,000 square feet of rentable industrial space. My guess is that Merritt RDU Business Park will be home to nearly one hundred companies. The buildings can accommodate all different types of uses, like warehousing/logistics, research and development, and services. The project’s location adjacent to the airport with easy access to transportation routes is certainly a key factor.
What does the near term look like in regard to industrial space demand?
I don’t foresee a slowdown. In my history in leasing, it’s been clear that in good or bad markets, people seem to desire industrial space. I don’t see the demand for that commodity space slowing down in the near future.
In addition, this market is well diversified across industries. In the past, maybe 20 or so years ago, The Triangle area was heavily weighted in telecommunications, research and development, and had a reliance on the state government being in Raleigh. However, fast forward to 2022, we’re in a position where we’re running on many different industries and not reliant on just a few. The energy that the life science industry has recently contributed to our market is vital to our future growth. We also are seeing significant in-migration. This market has an economy that’s diversified and is growing rapidly, which is going to keep driving the need for industrial space.
What are some of the ways that your day-to-day routine has shifted to meet new demands?
I think I’m more “on my toes” than I ever have been before, so I’m up earlier each day to get a jump on things. You have to be able to be creative as well as reactive in order to get commercial buildings delivered in this dynamic environment. We’ve always operated this way. Our late founder, Leroy Merritt, was an extraordinary businessman and generous philanthropist who believed in being actively engaged in the communities in which he built. This allowed him to have a finger on the pulse of the local economic climate so that he could support the evolving needs of local businesses. Therefore, as far as my day-to-day routine is concerned, I spend most of my days building relationships with local businesses, organizations and partners, giving back to the community through civic involvement and supporting our 14-person Merritt team.
How are you interpreting land scarcity as a potential issue down the road?
This market has the potential for growth for the foreseeable future in my opinion. In the past, the cities of Raleigh and Durham were the centers of the universe, and you wanted to be as close to them as possible. Land is certainly scarce in and around the Research Triangle Park. However, the outer ring of the Triangle provides opportunities for greenfield development. I believe this is a bright spot. That said, even though there are these green field development opportunities, not all land can be developed due to the site constraints and/or zoning. Finding suitable land is continuing to be a challenge, and we need to acquire sites in the right places for our type of development.
How would a possible slowdown affect your development strategies?
We’ve weathered a lot of storms as a company over the past 55 years. We’ve seen that even in slow markets, or rapidly growing markets, that the demand for our type of commodity space seems to remain relatively strong. We also follow a phased approach to our development that allows us to remain adaptable and get creative during challenging economic conditions. If there is a downturn, we will continue doing what we always do and align the pace of our development with the market demand. We try to invest in markets that are dynamic and diversified enough to remain resilient through economic cycles.
Where is investor confidence right now?
From an investor confidence perspective, it’s a challenge given the current development cost and rising interest rate environments. There have been some meaningful changes in the capital stack. We don’t see that changing in the near future. Overall, investor confidence is a little more tapered than it was before, but the industrial asset class remains in favor.
How will commercial real estate look like in the next five years as it relates to technology?
The simplicity that technology has been able to foster has been remarkable. I can only imagine it’s going to get better. The thing that jumps out is Building Information Modeling (BIM). This technology assists both buyers and sellers in modeling their buildings and performing due diligence. Collaboration platforms, such as Teams, have created a work environment that has improved communication and document sharing. These types of platforms will only get better with time. Ground Penetrating Radar technology can also help us understand the soils and hydrology. From an asset management perspective, it used to be that you kept your customer data and leads in a spreadsheet. However, we have new technology, such as improved CRM software applications, that have helped us real estate folks become more efficient and organized. Obviously, I see technology continuing to evolve and become better over the next five years.
What legislation or regulations are you currently keeping an eye on?
The first thing that comes up for me is zoning. Most townships and jurisdictions in the Triangle have a Unified Development Ordinance (UDO), however some are outdated and are currently going through overhauls. You have to keep your finger on the pulse in order to see what changes are being implemented. The good news is that a lot of these jurisdictions are bringing in stakeholders for collaboration in these overhauls. These jurisdictions are doing great work and implementing things that are common sense for their respective townships. It’s encouraging to see. The industry is also keeping an eye out for federal tax measures like carried interest provisions that were recently protected.
What are your organization’s priorities over the next year?
We’re going to continue building our company culture while growing our development footprint to serve local business needs. We’ve been lucky to build an amazing team here in North Carolina, and I’m proud of what they’ve accomplished. It’s not all about the buildings. In reality, it’s about the people who create these buildings that’ll be home to our customers’ businesses. We’re going to grow and expand our reach, but we will do it like we’ve always done: hiring exceptional people and by partnering with great companies. We also want to continue to be involved in giving back to our communities through civic engagement and charitable giving. That’s also an important part of our company’s culture.
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